The Good and Bad When Dealing with Financial Aid
Without financial aid, many students would not have the opportunity to attend college and obtain their degrees. Money is often one of the biggest—if not the biggest—obstacle when it comes to pursuing higher education. Through financial aid, even those from financially disadvantaged backgrounds have a shot at bettering their situation and achieving their career goals to improve not only their lives but that of their family as well. However, it is vital that students know what their options are, what to expect and which forms of financial aid are available to them.
For those that are unfamiliar with this concept, financial aid refers to any form of monetary assistance that helps students afford college related expenses. The funds received through this type of aid are typically put towards costs such as tuition, textbooks, room and board and miscellaneous fees.
Popular Types of Financial Aid
There are different forms of financial aid that students can apply for and receive. Grants and scholarships are among the most sought after because these are forms of aid that do not have to be repaid at a later date and time. It is, essentially, free money for school. Because of the demand for such funds and the fact that a majority of college bound students come from financially disadvantaged backgrounds, the number of organizations offering grants and scholarships has increased dramatically over the years. The good thing about that is the fact that it gives students the chance to increase their odds of being awarded such funds.
Grants are given to students based on a number of factors, such as financial need, association, ethnicity, record of achievements and accomplishments, special interests or religious affiliation. These classifications make it possible for virtually any student to find the right type of grant to apply to without worrying about a huge pool of candidates to compete against. Although there are large numbers of applicants, breaking up the grants into specific types helps to lower those numbers somewhat. Some notable and popular grants include the Pell Grant, SMART Grant and the AC Grant.
When it comes to scholarships, many students tend to get confused as to whether this form of financial aid is the same as grants or different. The truth is that the two serve the same purpose of helping students afford the costs of college but the application method and requirements for eligibility tend to differ. But in general, grants and scholarships can be treated as the same. Scholarships also award funds to students based on various criteria, including degree type, academic standing, career goals related to a specific field of study, college specific and merit-based. Merit-based scholarships are among the most popular because they focus on a student’s athletic, academic or artistic abilities. Full-ride sports scholarships are a prime example of merit-based scholarships.
Student loans are another form of financial aid that is widely used by students. However, unlike grants and scholarships, this type of financial assistance must be paid back to the lender over a period of time. Student loans typically fall into the following categories: student, parent and private.
Student loans deal with borrowing money from the federal government. Stafford and Perkins are the most well known loans in this category and come with low interest rates, don’t require a credit check and gives students the option of deferring payments for up to six months after graduation.
Parent loans hold the parent of the student ultimately responsible for paying back the amount of the loan over time. Parents are able to borrow money from a lender on behalf of their child in the specific amount needed for costs not covered by other types of financial aid. PLUS loans are the most common example of a parent loan.
Private loans do not involve the federal government at all and allow students and/or their parents to borrow funds needed to afford college-related costs not already covered through federal aid. Because this type of loan deals with private lenders, the requirements tend to be more stringent and rely on the borrower’s credit score for eligibility.
While this method of receiving funds serves the goal of helping students and their families pay for school, entering into such a loan agreement without proper research and planning could have negative consequences in the future. Being unable to pay back the loan on time or falling behind on the payments could hurt a person’s credit score and may even become a long term financial burden long after graduation. There are also high interest rates involved with some loans, so the actual amount being paid back could be much more than the original amount borrowed.
Students whose parents are veterans will want to check out military aid for financial assistance with school. Veterans and their dependents often qualify for great programs to help them afford college, such as the Montgomery GI Bill. This type of financial aid helps cover a percentage of overall school costs.
Tips for Applying
One of the best ways to tackle the financial aid process is to complete the Free Application for Federal Student Aid, more commonly known as the FAFSA. The purpose of filling out and submitting this application (which is free to do) is to calculate how much money a student would need to attend the college of their choice. Once a family knows this amount, they can then figure out how much they can afford through their own funds and how much will need to come from financial aid. This is a much easier way to choose which grants, scholarships and loans should be applied for and in what amounts. While the actual amount awarded varies, students can receive as much as $500 to $1,000 per semester/quarter or more.
Another helpful tip for applying is to focus on grants and scholarships that you have a higher chance at being eligible for, such as sports (if you’re a student athlete) or those that are ethnic or religion based.